The UK plans to phase out unabated coal-fired power stations by 2025, as long as security of electricity supplies is maintained.

The proposal, launched to great fanfare in the run up to the Paris climate summit, remains subject to consultation. However, events could take the decision out of ministers’ hands.

The UK’s coal use fell by a fifth during 2014, to historic lows not seen since the birth of the industrial revolution. Demand fell by another 22% during 2015 and is down by two-thirds year-on-year in 2016 to date. Across six months of this year, solar generated more electricity in total than did coal.

The economics for coal have deteriorated significantly. Falling gas prices and higher carbon taxes have combined to leave coal generators facing increasing losses. Coal supplied zero power to the UK for the first time ever in early May. Coal generation across 2015 was the lowest since the early 1950s and 2016 is even lower. During 2016, coal prices have surged, though high peak power prices have provided opportunities for remaining coal plants.

Coal closures

Three large coal plants have closed during 2016: Longannet, Ferrybridge C and Rugeley (see map and tables). Eggborough and Fiddlers Ferry had planned to close, but have put those plans on hold.

Around 4 gigawatts (GW) of capacity has closed this year, leaving 15GW able to operate today. Together, these remaining plants emitted 53m tonnes of CO2 in 2015, around 11% of total UK greenhouse gas emissions that year. As well as reducing greenhouse gas emissions, this year’s closures will reduce air pollution.

It’s worth noting that 8.4GW of coal capacity has already closed since 2010. Coal is usually thought of as baseload generation that operates constantly day and night, but most coal plants were generating power less than 10% of the time in May and June, according to Aurora Energy Research. Drax and Aberthaw B just topped 50% in June while Rugeley, now closed, touched 50% in May.

After long periods of much-reduced running, a number of coal plants have ramped up operation as the UK moves into late autumn. Aberthaw B, for instance, has been running close to capacity.

The plants that have shutdown or will operate reduced hours are slightly older than those still expecting to stay open. However, all but two of the remaining stations are more than 40 years old.

Given unfavourable market conditions, the decision over whether to keep coal plants running at a loss is complicated by two separate policies designed to keep the lights on.

The capacity market, due to kick in from winter 2017/18, will pay power stations a retainer to be available during winter evenings. It pays a fixed price for each kilowatt of capacity, up to the level of expected peak demand.

The auction for 2019/20 will pay £18/kW for a total of 46GW, meaning the capacity market will cost nearly £1bn in 2019 alone. Several coal plants have secured capacity market contracts worth £139m in 2019, meaning they should keep running until at least the end of this decade (see table).

However, Fiddlers Ferry considered closing despite having secured a contract for 2018/19. It failed to win a 2019/20 contract. It seemed to have decided that paying a £33m penalty for breaching its 2018/19 agreement would be cheaper than the losses it faces before then.

That decision looked to have dealt a blow to the credibility of the capacity market. It added to pressure for reforms and a sense that the scheme is actively undermining security of supply. The government now plans to strengthen the capacity market and bring it in a year early, from winter 2017/18.

SSE’s latest announcement, at the end of March, means the plant will remain open for winter 2016/17, but still leaves a question mark over whether it will fulfil its 2018/19 capacity contract. The station has now also prequalified for capacity market contracts in 2017/18 and 2020/21, raising the chance that it will remain open for longer.

A second scheme known as the National Grid Supplemental Balancing Reserve (SBR) is designed to secure supplies in the years before the capacity market kicks in. It is paying a small amount of reserve capacity to remain on standby, operating only when supplies are tight.

For winter 2016/17, National Grid is paying £34/kW for 3.6GW under the SBR, at a total cost of £122m. While the per-kW cost is nearly double the capacity market’s, the overall cost is lower.

Two of the coal plants that planned to close — Eggborough and one unit at Fiddlers Ferry — have secured SBR contracts for winter 2016/17, offering stays of execution on their eventual closure. It’s worth repeating, however, that these units will only operate on request from National Grid.

There was an expectation that the 2016/17 SBR might need to be enlarged now that additional coal plants are due to close. However, current rules limit the size of the SBR to 3.7GW, against 3.6GW contracted to date. Some analysts believe there is no need to expand the SBR.

It’s possible that more coal plants will opt to retire next spring. Aberthaw, Cottam and West Burton were all seen as at risk of closure due to unfavourable market conditions, according to a February Reuters article. Indeed, Cottam and West Burton, both owned by French utility EDF, have defaulted on three-year capacity market contracts they held, having decided not to carry out upgrades. The plants could still bid for further one-year contracts.

Fears that the UK will be unable to maintain secure electricity supplies could spell trouble for the government’s coal phase out plans. The government wants new gas capacity to fill the gap, though there is disagreement over the scale of the requirement and the impact on UK climate goals. Investors are also not currently attracted to building new gas plants in part because the capacity market price is not high enough.

Update 9/6/16 – Rugeley power station in Staffordshire has closed earlier than expected. It had been due to run until the end of June.

Update 27/4/16 – Aberthaw B power station in Wales is to run reduced hours from April 2017. We have updated the map and tables. Note also that Drax, once the UK’s largest coal plant, has said it could stop burning coal within three years if it received extra subsidies from the government to burn biomass instead.

Update 31/3/16 – Fiddlers Ferry has decided not to close. One of its four units already had a contract to be available in winter 2016/17. Owner SSE says a second unit has won a contract to provide ancillary services to National Grid for the next year. The third and fourth units will remain connected to the grid and may be entered into the capacity market in for winter 2017/18. We’ve updated the text below to reflect this and other recent developments.

Update 24/3/16 – Longannet, Scotland’s last coal-fired power station, is switching off today. Ferrybridge C has also stopped generating power. We have updated our map.